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Effects of Reducing Child Care Subsidy Copayments in Washington State

Federal funding for child care subsidies has increased substantially since 1996. Although many more low-income families are receiving help paying for child care, there is little rigorous evidence to guide states’ decisions on how to structure subsidy programs. This is the final report of a two-year evaluation in Washington State focusing on one key state policy decision: how much families should contribute when they receive subsidies for child care (the copayment).

The study described in this report examined the effects of reduced copayments on child care subsidy use, employment and earnings, and receipt of Temporary Assistance for Needy Families (TANF) and food stamps. Between October 18, 2005, and November 7, 2005, 5,106 families were randomly assigned to either a control group that was assigned the standard copayment amounts, or a program group that was assigned an alternative copayment schedule. Random assignment ensures that any systematic differences that emerged later could reliably be attributed to the alternative copayment schedule.

In determining how much families will be charged for copayments, Washington divides them into three income groups. In short, the alternative and standard copayment schedules were the same for families in Tier 1 (below 82 percent of the federal poverty level), diverged by $35 each month for families at the bottom end of Tier 2 (between 82 and 137.5 percent of poverty), and differed the most for families in Tier 3 (between 137.5 and 200 percent of poverty). When they entered the study, Tier 2 families had an average monthly copayment of $50 under the standard schedule but $34 under the alternative schedule, and Tier 3 families paid $211 on average under the standard copayment schedule but $134 under the alternative schedule. Key results of the study are:

The alternative copayment schedule resulted in longer subsidy use. In particular, program group families in Tier 3 received subsidies for 1.1 months longer than comparable control group families. The impact on subsidy receipt rates grew at around six months after families entered the study, when most of them would have had to reapply for subsidies and would have learned about changes in their monthly copayments.

The alternative copayment schedule did not result in more employment. For Tier 3 families, for whom the alternative copayment differed most from the standard schedule, 77 to 88 percent of both the program and control groups worked in any given quarter after random assignment, leaving little room for the program to have an effect. The program also did not increase earnings or reduce use of food stamps or TANF.

These results should be interpreted cautiously. Although reduced copayments resulted in longer subsidy use, reliable information on child care arrangements and stability was not available for this study. It is therefore impossible to know whether reduced copayments helped families afford their desired form of child care or improved other outcomes related to child care. Although reduced copayments did not result in increased employment or earnings, as hoped, it is important to remember that copayments were reduced the most for the highest-income subsidy recipients, a group that worked steadily even under the standard copayment schedule, leaving little room to improve employment outcomes.